4:30am (NY Time) UK GDP q/q Forecast 0.4% Previous -0.2%
ACTION: (GBP/USD) BUY 0.7% SELL 0.0%
We’ll be trading the much anticipated UK Prelim GDP q/q for Q4 2009. As we know, GDP is “the market value of all final goods and services produced within a country in a given period. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time.” GDP is the basic direct measure of the economy’s health, and a stronger GDP means that the central bank will be more likely to raise interest to curb inflation.
Our surprise factor is 0.3%, and we’ll look to possibly SELL GBP/USD at 0.0% or worse and BUY GBP/USD at 0.7% or better. This is the first positive GDP release from the UK for some time now, and if we do get a positive release, it could mean that the economy in the UK is on its way out of recession, therefore adding to the demand for GBP. However, if we get another negative release, the tide will turn as traders dump any GBP in their portfolios.
Since the Prelim GDP is the first release of the quarterly GDP, it’s usually the one with the most potential for surprise. This is probably the most important news event for the UK this week.